Another Delay for Bitcoin ETF Application

The Securities and Exchange Commission (SEC) has once again postponed the approval of a Bitcoin exchange-traded fund (ETF), pushing the decision back until at least fall. While the agency has not shown much favor towards approving such funds in the past, there is still growing momentum in the crypto industry to offer them.

This recent delay pertains to the proposed ARK 21Shares Bitcoin ETF, which is being sought after by Cathie Wood’s ARK Investment Management. Alongside many other firms, including BlackRock, WisdomTree, and Invesco, ARK has applied to establish funds that would hold spot Bitcoin. This is different from existing Bitcoin funds on the market, as they mainly hold futures contracts or function similarly to closed-end funds like the Grayscale Bitcoin Trust.

Previously, the SEC rejected similar applications, citing concerns over inadequate fraud and manipulation controls on crypto trading platforms. However, in the most recent round of applications, fund companies have included new provisions to address these issues.

The SEC announced on Friday that it would seek public comment on a specific aspect of ARK’s application, effectively delaying the decision for several weeks. However, it should be noted that a court ruling could potentially expedite the process.

The U.S. Court of Appeals for the D.C. Circuit is expected to decide soon whether the SEC made an error in denying Grayscale’s request to convert its $18.3 billion GBTC into an ETF. In a March hearing on the case, the judges expressed skepticism towards why the agency treats Bitcoin futures ETF applications differently from spot Bitcoin applications.

The Future of Bitcoin ETFs: Will the SEC Approve?

It appears unlikely that judges will force the agency to approve funds for Grayscale. However, if Grayscale were to win the case, the SEC might attempt to deny the applications on different grounds. In an extreme scenario, the SEC could even retract its approval of Bitcoin futures ETFs.

Resistance vs. Approval

Despite potential obstacles, it seems that eventually these products will be approved. The path of least resistance seems to lead to the approval of Bitcoin ETFs.

Silence From the SEC and ARK

The SEC and ARK have not yet responded to requests for comment. In a recent Bloomberg interview, ARK CEO Cathie Wood mentioned that she expects the SEC to approve many Bitcoin ETFs at once, rather than giving first approval to ARK.

The Potential Impact

Some crypto firms project that Bitcoin ETFs could generate billions of dollars in demand for the token. However, it is worth noting that this could divert investment away from other Bitcoin-related products.

GBTC Holders: Potential Beneficiaries

If an ETF is approved, holders of GBTC could be among the biggest winners. Currently, GBTC trades at a 25% discount compared to the value of the Bitcoin it possesses. Converting it into an ETF would eliminate this gap.

The Road Ahead

It is important to acknowledge that GBTC previously traded at a discount almost twice as large. History shows that there will likely be further twists and turns before a Bitcoin ETF gains approval. Therefore, ARK’s Friday application delay is more of a bump in the road than a setback.